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There’s been a lot of speculation about Google’s plans to deploy Gigabit fiberoptic Internet. Where will they deploy? What are the criteria? How many homes will they serve? Will they favor cities, or rural areas?

Your guess is as good as mine. But as a part of the global tech community and as someone who has spent a lot of time at Google and with people from Silicon Valley, these are my guesses about what they might do.

Cities Offer Higher Returns

Cities have the kind of density required to deliver a lower cost-per-home deployment. Less cable, a single point of negotiation and contact, and the ability to deploy using lateral construction from fiber conduits means lower overall costs.

Multi-family housing means more customers per square mile. Baltimore has a city-owned conduit system which can serve over 90% of the area of the city — without requiring the use of poles or negotiating with third party utilities.

Rural Areas Cannot Be Served Profitably

Telephone companies receive funds from the Universal Service Fund to subsidize service in areas that otherwise cannot be profitably served. Google is not subject to the regulatory framework (Communications Acts of 1934 and 1996) that would give it access to USF funds; in fact, it has every incentive to fight to avoid falling under such regulation.

Google is not a charity, it’s not being subsidized by the government, and it is not a monopoly. There is no special reason why Google should care about making services available in rural areas, and there is certainly no profit motive. Rural service requires fuel, vehicles, and people on the ground. Every part of this is expensive; it’s why it loses money and why it has to be subsidized by USF funds.

Google simply has no motive at all to serve rural areas. I’ll eat cat meat if Google selects a rural area for this trial. It just won’t happen.

Tech Is Opinionated

Google has opinions. In the tech world, people take a stand: Google and Apple both expressed strong opinions about how a smartphone ought to operate. Opinionated software is an emerging trend in software tools. Software designers bake their opinions into the tools they create. People who use those tools end up adopting those opinions; if they don’t, the tools become counterproductive, and they are better off using different tools.

There is every reason to believe that Google’s opinion is that the suburbs are obsolete, and that that opinion will inform their strategy for building out a fiber network. Here’s why Google likely believes the suburbs are obsolete:

Suburbs rely on car culture, which consumes time; that’s time that people can’t spend on the Internet, making money for Google.

Suburbs are not energy efficient, requiring lifestyles that generate more CO2 emissions. Google has said it wants to see greater energy efficiency in America.

Google CEO Eric Schmidthas said he wants to see America close its innovation deficit. There’s nothing innovative about the design of the suburbs. It’s a tired model.

Schmidt has supported Al Gore politically and in his efforts to combat global warming. Regardless of what you might think of Al Gore or global warming, we have a pretty good idea what Google thinks of the issue.

Gigabit Fiber in cities could utterly revitalize them. We’ve been looking for ways to fix our cities for the last 50 years. The last renaissance was powered by large-scale economics; a new renaissance can be launched with large-scale communications investment.

Google’s employees are young, idealistic, and believe in self-powered transportation. It’s worth pointing out that the Google Fiber project lead, Minnie Ingersoll, is an avid cyclist.

The Suburbs Are Done

I’ve said it before. So have others. But I’m not promoting that they be subject to some kind of post-apocalyptic ghettoization, either, so calm down. No one’s threatening your commute or your backyard barbecue.

But what I am saying is that at some point we need to take a stand about where we’re going to invest in our future. About where we believe we can regain competitive advantage and efficiency.

I believe our only hope to do that is with smart, well-designed urban cores, connected with world-class communications infrastructure and fast, green, and efficient people-powered transportation. And I think Google believes that too. Bet on it.

The Real Reasons You Don’t Have Fiber

What are the real economics of broadband infrastructure? It’s not so simple as market opportunity, investment, and subscribers; Verizon and Comcast have different regulatory histories and see the world differently. Google, as a potential new entrant, has completely different motivations.

Let’s take a look at the regulatory background, and then get a sense of what’s really motivating Verizon, Comcast, and Google.

Regulatory Background

We have gradually come to think of Verizon and Comcast as equals: big, for-profit telecom companies — competitors for TV, Internet, and telephone service. But they got to their current positions through very different routes. Here’s a brief (and rather incomplete) history.

In 1984, the former AT&T was busted up into seven Baby Bells: Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell, and US West. Terminator-like, these companies have been spending the last 26 years reconstituting themselves, merging into very large firms. Bell Atlantic changed its name to Verizon in 2000 after acquiring GTE.

Telecommunications regulation in the United States has a long history and reflects theory originally applied to railroads and other public utilities. The idea was that communications was a public good and because the network had to be large and interoperable to be effective, it was best served by a natural monopoly. So, assets like public rights-of-way were made available for the monopoly to use, in exchange for an agreement to provide Universal Service, covering the entire population.

To keep the monopoly from charging unreasonable prices, regulators mandated that their services should be marketed at cost, plus a reasonable and sustaining profit margin. This means that there is no incentive for them to keep costs down; in fact, the higher their costs, the more raw dollars they make.

Verizon today operates under this kind of regulatory background, which was outlined initially in the Communications Act of 1934, and then amended by the Telecommunications Act of 1996 — which has subsequently been eroded and modified by case law and other FCC actions.

The FCC, under Bush-appointed Chairmen Michael Powell and Kevin Martin, tended towards the opinion that the best way to foster competition and innovation would be to empower a small number of well-capitalized firms and let them compete together in the marketplace.

Comcast, for its part, came together very differently. Cable TV franchises were primarily granted by local municipalities, starting in the 1950’s. Comcast acquired dozens of these small firms, each with their own regulatory agreements with cities and counties. By 2000 or so, this aggregation started to resemble the sort of “large firm” that the FCC thought could be an effective competitor to the telephone companies.

So that’s how we got here. Verizon is heir to the top-down, cost-based monopoly regulation subsidized by the Universal Service Fund, which requires that it provide telephone service even in rural areas. Comcast is the product of the roll-up of dozens (if not hundreds) of small cable TV firms. Now let’s take a look at their interests in the current landscape.

Verizon

Verizon, in many ways, is just the current-day incarnation of a big chunk of the original AT&T. It’s still the primary telephone infrastructure provider and the bulk of its physical wiring plant is copper. It operates the same switching facilities that AT&T did back in 1984. In many important ways, nothing has changed.

What about FIOS? Isn’t Verizon innovating there? Aren’t they making this investment to “make money?” It’s complicated.

Verizon made the decision to install FIOS primarily to block competition. The Telecom Act of 1996 required that telcos make copper wireline infrastructure for competitors to run alternative services. This is where alternative telcos like Cavalier, Covad, Adelphia, and many others came into the market. You’ll notice that almost all of those companies are now defunct or severely hamstrung.

This is in part because Verizon (and its peers) set out on a strategy to make a competitive business model all but impossible. FIOS was part of that strategy.

When Verizon installs FIOS, they almost always remove the copper wires that could otherwise have been used by competitors; and this has effectively shut them out.

Verizon has spent over $20 Billion to build out FIOS in its service area. Ostensibly this might look like “investment in innovation” to observers. But in fact, this spending was mostly done to block competitors and to destroy the pro-competition provisions of the Telecom Act of ’96.

It should thus come as no surprise that Verizon has recently announced that they are unlikely to expand their FIOS network further. This isn’t because they can’t get more new subscribers in new areas (like downtown Boston, which is still not served); rather, it’s because they have calculated that the costs of future expansion exceed the downside risk of lost profits caused by competitors in the areas that remain.

They have put FIOS in all the places where it was either easy to do so or where the competition was too strong to ignore. Now that the competitors are mostly defunct or severely weakened, the threat is just not there to justify expansion.

Like feudal warlords, they invested just enough in FIOS to block out competitors, rejigger the regulations, and maintain a status quo of mediocrity. And we’re supposed to think this is innovation?

Comcast

Comcast has different problems. Because all of their regulatory agreements are negotiated with individual municipalities, it’s more difficult for them to make investments across their entire footprint. This is why Comcast often rolls out new products and services in trial communities, and then rolls them out to new areas one at a time.

Comcast does have a very large television service footprint, and their acquisition of NBC and other content providers over the years, like HTS, is an attempt to establish themselves as a vertically integrated entertainment provider. They control the entire stack, from the physical cable, to the viewer, to the content itself. This means that they are protected from threats from content providers who might try to command high rates for popular content. Disney (who controls ESPN and ABC) often finds itself in battles about rates with cable providers. Acquiring NBC/Universal means one less potential threat of rate hikes for Comcast, and higher overall profits.

But Comcast’s physical plant is dominated by aging coaxial cable infrastructure. While local head-ends are fed by fiberoptic backbones, local distribution to the home is through co-axial cable, which can degrade in performance when it rains, is subject to lightning damage, and can only go so fast. Fiber-to-the-home is vastly superior, but it would cost Comcast billions to upgrade its plant. In the absence of competitive pressure (such as that which was faced by Verizon), they have no incentive to do so. Instead they are happy to push their existing plant as hard as it can go, using standards such as DOCSIS 3, and invest in fiber-to-the-home infrastructure only as necessary or convenient.

Google

Google has recently announced that they would like to spawn innovation, and potentially build out gigabit fiberoptic infrastructure in one or more communities in the United States. I helped organize Baltimore’s municipal response to Google’s Request For Information for this project.

Google’s proposing something very different from what Verizon and Comcast offer: an open-access network, over which new entrants could provide Internet or other services. This is exactly the paradigm that Verizon has fought to destroy with FIOS.

Comcast has also fought open access repeatedly; before Verizon settled on FIOS as its primary anti-competitive strategy, Verizon tried to force cable companies to become subject to the same kind of infrastructure-sharing to which it was subject under the Telecom Act of 1996.

And Comcast fought this effort mightily; in 2002, I testified before the Maryland House of Delegates in support of a bill that would force Comcast to open its network, and Comcast’s lobbyists managed to defeat it.

Also in 2002, working alongside Verizon-supplied lobbyists, I testified before the FCC with TCP/IP co-inventor Vint Cerf (now a VP at Google) arguing that cable companies should be forced to provide “open access” to their networks because it would promote competition and entrepreneurship. At that hearing, FCC Commissioner Robert Pepper made it clear that the FCC believed that Verizon and Comcast could provide all the competition we would ever need. We see how that’s turned out.

To date, there has not been any significant open access network deployment in the United States. And with the decline of competitive telco-based services, telecom innovation has now stalled entirely. It’s time for something new.

Net Neutrality

Google has a different potential problem on its radar. In the US, Comcast and Verizon control access to a large percentage of its customers. Currently, the Internet operates under a doctrine of “Net Neutrality,” which is to say that customers and Google all just pay for access to the network, and each can communicate freely with anyone else on the network.

Various telecom executives (most notably former AT&T CEO Ed Whitacre, now CEO of GM) have argued that companies like Google should no longer get free access to their customers. Folks like Whitacre believe that the natural role of a company like Verizon or Comcast is to act as a toll-gate, charging both content providers (Google) as well as customers for access to each other.

As you might imagine, Google heartily opposes this idea: it could dramatically increase their costs and would destroy the “level playing field” which has dominated the Internet from the beginning. Startups could be stifled because they might need to negotiate an agreement with broadband providers to get access to customers. This is a war that Verizon and Comcast appear ready to start, and people like News Corp’s Rupert Murdoch are fanning the flames.

Google’s Fiber Plan

Google’s announcement that it intends to build ultra-fast open access fiber networks is its declaration of war against the threatened end of net-neutrality. Further, this is a productive use of Google’s vast stockpile of cash; it’s something tangible it can do to ensure its market position.

And it’s a move that’s ideologically compatible with its mission. Google genuinely believes that the expansion of a fast, net-neutral Internet has positive effects on society, and it’s also good for its bottom-line. More people online means more ad-views which means more advertising, and more dollars for Google. There’s no downside for them; it’s an expensive proposition to be sure, but it’s less expensive than paying for access to customers in a world without net-neutrality.

By promoting itself as a good citizen, wrapped in the banner of open-access, innovation, and net-neutrality, ideologically-sympathetic regulators such as the FCC’s new Obama-appointed Chairman Julius Genachowski are likely to view Google’s approach favorably. This would allow Google to establish a vertically-integrated, long-term market position which would be hard for Verizon or Comcast to disrupt.

And the kicker? The open-access network Google’s proposing really would promote innovation and entrepreneurship. The United States is ranked 15th in broadband penetration worldwide today. This is a chance to change that.

Don’t believe that Verizon or Comcast will make these investments unless forced to do so. And while Google may also feel it has no choice but to build its own network, Google at least has a vision that goes far beyond just sustaining a mediocre status-quo; they truly believe in the level playing field that has given birth to so much innovation.

I set this up for use by conference organizers and members of the press who may need my bio and a photo. I try to keep this up to date.

Long Bio

David Troy is a serial technology entrepreneur. He started his first business at age 14 in 1986, and has been working in the information technology industry since then. In 1995 he founded ToadNet, a major regional Internet service provider near Baltimore, which he sold to Landmark Communications in 2004. He has been an active contributor to projects such as Asterisk and developed a large-scale distributed call-center technology and VOIP telephony systems for global technology companies. In 2007, David launched two side projects, Twittervision and Flickrvision, which were featured in the 2008 exhibition Design and the Elastic Mind at the Museum of Modern Art. Since then, David has been exploring projects in data visualization with his current company Roundhouse Technologies, which he founded in 2008 with partner Stephen Muirhead. David is also very active in the local technology scene in Baltimore and is a co-founder of Beehive Baltimore, the first coworking space in Baltimore. He is also cofounder of Baltimore Angels, an angel investing group specializing in early-stage information technology startups. In 2009, David also founded TEDxMidAtlantic, a conference dedicated to the power of ideas to change the world; in 2010 he helped organize the BmoreFiber initiative to attract Google’s fiberoptic network investment to Baltimore. He is 38 and lives in Baltimore, Maryland with his wife and two children. He is a certificated private pilot.

Short Bio

Dave Troy has been a serial technology entrepreneur since 1986 when he started a computer mail order business at age 14. Since that time he has founded multiple companies, including an early Internet service and hosting provider, ToadNet, which he sold in 2004. Since then he has been working on software development and in building the technology community in his hometown, Baltimore, Maryland. He was the force behind many tech-community initiatives including SocialDevCamp East, Barcamp Baltimore, Beehive Baltimore (a coworking facility), Baltimore Angels (an angel investment group), and TEDxMidAtlantic. He also serves on the board of two regional technology councils and is president of the Friends of the Maryland State Archives. He resides in Baltimore, Maryland with his wife and two children and is a certificated private pilot.

410 Labs Bio

Dave Troy (CEO) is a successful serial entrepreneur and investor and founded ToadNet (ISP and hosting company, sold to Landmark Communications). He is also an angel investor and cofounded Baltimore Angels in 2009. In 2007, Dave created Twittervision, a real-time visualization of traffic on Twitter, and has been credited by the Twitter founding team as the first developer to use the Twitter API. He co-founded 410 Labs in 2010 to focus on creating tools to help people combat information overload. He currently serves as CEO and product architect for Mailstrom at 410 Labs. He lives in Baltimore with his wife and two children, and is a certificated private pilot.

Feel free to use the images below. If you need something else, please feel free to contact me at davetroy at gmail dot com, or setup a meeting with me: http://bit.ly/davemtg

Over the last few weeks I’ve been working with Baltimore Mayor Stephanie Rawlings-Blake, a diverse group of volunteers, my friend Tom Loveland (the Google Czar), and other city officials to organize a response to Google’s Request for Information regarding a potential investment of high-speed 1Gbps fiber-to-the-home Internet infrastructure.

Along the way, something remarkable happened.

We laid out a case for Baltimore, and it’s compelling. While other cities have been pulling stunts to try to get Google’s attention, we’ve been assembling a data and fact-driven case for why Baltimore in 2010 is uniquely suited to innovate with the addition of high-speed fiber infrastructure. Google’s corporate culture is famously and relentlessly data-driven. We’ve answered the questions completely, and have highlighted Baltimore’s unique strategic qualifications. We didn’t just stress “how badly we want this,” we built a concise, logical, and detailed case for why Google should want us.

While it’s probably been obvious that we have been working hard and generating press, the public is not aware of our overall strategy, and that’s partly because we have not been able to talk about all of it. Here are some of the reasons why Baltimore can and very likely will win this trial.

Baltimore is unique in that it owns and operates its own expansive conduit system; most cities do not, and this means that Baltimore can deploy a new network faster and less expensively than other cities can.

Baltimore is home to the only philanthropic field office of Open Society Institute, and founder George Soros (the world-famous financier) has pledged to support a Google investment in Baltimore with programs to help alleviate the digital divide. He has urged Google to select Baltimore as the site of this trial, citing the same reasons that Soros selected Baltimore for his philanthropic efforts.

We’re also working with Bob Kahn, co-inventor of TCP/IP to talk about new ways to archive and share municipal data. Mr. Kahn’s counterpart is the other “father of the Internet,” Vint Cerf, who is now a senior executive at Google. And we believe that Cerf will be helping to review these submissions.

We worked with the Economic Alliance of Greater Baltimore, the entity responsible for marketing Baltimore to the business world at large, to shape our messaging and ensure that we had factual economic data. The Greater Baltimore Committee collaborated to align its business members with the effort, securing letters and videos of endorsement from dozens of key large employers.

Last week, the FCC released its National Broadband Plan and one of its authors is a Baltimore City resident. We sought his counsel and advice.

We aligned support of our corporate community, including Under Armour, T. Rowe Price, and dozens of other companies. We received the enthusiastic support of Johns Hopkins University, The University of Maryland System, Loyola University, and a long list of other schools. Gilman School suggested that it could share its K-12 curriculum with the world with the addition of gigabit broadband.

The Space Telescope Institute produced a stunning, compelling video with astronaut John Grunsfeld.

We’re highlighting our burgeoning music and film scenes. In 2008 Baltimore was voted Best Music Scene by Rolling Stone, and the MICA-produced documentary “Music for Prudence” was just awarded an Oscar.

Urban development author James Howard Kunstleraddressed the Downtown Partnership just yesterday, making the case that Baltimore is poised for a population explosion as we enter into an era of urban “redensification.” I share that vision and believe that high speed infrastructure is one of the most important urban design investments we can make today.

In this process, we have articulated a powerful vision for the future of Baltimore, and that vision isn’t going away. We’ve identified our key strategic strengths, and they are the foundations for our shared future. We can’t control whether Google will choose to make an investment here. But that’s not what is most important: we’ve built a case for why we should be investing in ourselves. And that’s a message that resonates with everyone from carriers and broadband providers to prospective residents and businesses.

We have several “aces in the hole,” and our prospects are beyond strong: we’re feeling lucky, as they like to say at Google. But frankly, if Google chooses not to invest here at this time, we should seriously consider making this investment ourselves — the returns would be immense.